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Subdued prices of vegetables, cereals and dairy products pushed down retail inflation to a three-month low of 8.28 per cent in May.

The retail inflation, measured on consumer price index (CPI), was 8.59 per cent in April.

In February 2014, retail inflation was at 8.03 per cent, followed by consecutive rise in March (8.31 per cent) and April.

As per the data released by government today, food inflation also fell slightly to 9.56 per cent in May against 9.66 per cent in April.

During the month, vegetable prices were down by 15.27 per cent as against 17.5 per cent in April. Prices of cereals and its products came cheaper with rate of price rise at 8.81 per cent as against 9.67 per cent a month ago.

Likewise, rate of price rise in milk and milk products remained at 11.28 per cent, slightly lower than 11.42 per cent in April, showed the data.

Among others, food and beverages inflation stood at 9.40 per cent in May versus 9.66 per cent in the previous month; fuel and light prices expanded at 5.07 per cent during the month as against 5.96 per cent rise in April.

However, fruit prices turned costly in May with rate of price rise at 23.17 per cent as against 21.73 per cent a month earlier.

Also, prices of oil and fats went up by 0.91 per cent in May compared to 0.35 per cent rise in the previous month. Protein related items such as eggs, fish and meat had a higher rate of inflation at 10.11 per cent as against 9.41 per cent in April.

According to the data, the corresponding provisional inflation rates for rural and urban areas for May 2014 are 8.86 per cent and 7.55 per cent, respectively.

The CPI data for June 2014 will be released on July 14, the official statement said.

Debopam Chaudhuri, Chief Economist, ZyFin Research: Retail inflation is inching towards RBI’s target of 8%. However, manufacturing activity remains a concern, with no significant growth trend evolving within the IIP. Instead, the latest estimates for April suggest a decline in consumer durables and non-durables. Further, sectors like apparels and motor vehicles continue to be in deep slowdown and have been estimated to have declined by 22% and 15% in April 2014. In a consumer demand driven economy like India, where more than 55% of the GDP is composed of private spending, a significant demand push is necessary for any sustained recovery in the business cycle. We expect the Reserve Bank of India to take cognizance of the elusive growth situation now and embark upon a much needed softer interest rate regime. The only positive development underway so far is improving sentiment among consumers and investors, alike, riding on firm expectations from a stable central government.